FLORIDA REAL ESTATE INVENTORY

Florida Real Estate Market UpdateFlorida Buyer Broker  Real Estate

Florida Real Estate Inventory 

With the exception of a few geographical areas, there are plenty of Florida homes for sale.  There is still a problem for the first-time buyer and middle income  buyer, because the price of real estate is no longer affordable. 

Even foreclosure properties are priced higher than most buyers can afford and typically need a lot of work when they are offered for sale.

Incomes for potential 2nd home and primary homeowners has not kept pace with the rising price of real estate in Florida.  

For decades, the most affordable real estate for entry level Florida homes for sale  was between $150,000 for a condominium and $350,000 for an entry level single family home.  More affluent buyers and  2nd home buyers have typically spent up to $450,000 for an off water luxury condominium, $800,000 to $900,000 for a resale beach front luxury condominium.  The average affluent buyer spent between $500,000 for a resale home and up to $800,000 for a new second home in a golf course community in Florida.

During 2019 and in the summer of 2020 with COVID-19 many Florida residents lost their jobs.  Many were unable to pay their mortgages.  Most, but not all, lenders offered property owners options to keep their property by postponing mortgage payments and later modifying their loans.  The foreclosure process in Florida takes about 2 years. 

Foreclosure percentage is likely to gain momentum.

Between 2021 and 2023 annual rental rates began to dramatically increase. Large corporate investors added Florida single family homes to their REIT (Real Estate Investment Trust) portfolios.  Many targeted coastal and recreational areas in Florida to maximize the seasonal rental opportunity.  They also based their annual rental rates on seasonal rates.  More renters are sharing spaces and homeowners are renting space in their homes via AirBnB to meet their food and housing needs in 2023.  Some, new, large apartment complexes have large vacancy ratios.  Investors want to make a profit but they are not lowering their rents to fill their expensive new high-rise properties.   Rentals are more plentiful in the spring, summer and fall and often some price adjustments are made in those months.  Most of Florida’s annual renters can not afford to pay seasonal rental prices annually.  Consequently, they also can not afford to save to purchase a property in the future. 

Real estate brokers are buying homes from the sellers and flipping them to investors at high prices before buyers have an opportunity to purchase.   

In 2019 and 2020 people needed to sell their properties.   During the Covid 19 pandemic, buyers did not want to go inside of a property for a viewing.  Real estate brokers began buying their sellers listings and flipping them to investors.  This was the beginning of a new era of real estate when sellers began giving up their equity to real estate brokers who buy and flip properties, in come cases with simultaneous closing.  It is not hard to understand why a desperate seller would give up their equity during Covid, when they have lost their job and need to relocate to a new location, or perhaps even lost a spouse.  Covid-19 pandemic stifled real estate sales.  Brokers needed to make a living, buying their own listings and flipping them to another buyer in the future kept them in business.  It wasn’t long before REITS (real estate investment trust) and foreign investment companies, got into the act.  Many of the single family homes were bought to be used in Florida as AirBnB rentals.  

Real estate brokers continued to purchase homes at discounted prices from sellers who needed to sell long after the Covid 19 scare was over.  At the end of 2021, one very large real estate broker from California admitted they made a mistake.  They said their real estate valuation system was flawed.  And that properties do not appreciate at the high rate they were trying to obtain from buyers by flipping.  They immediately sold off their real estate inventory.  There was never any accountability required of this or any other brokerage buying directly from the seller and flipping at a profit. 

Why are real estate brokers still buying and flipping properties without giving the seller the equity?

This new era of real estate continues with both large and small brokerages offering to buy the seller’s property and then inflating at higher prices to  investors waiting in the wings.  The large investors seems to be hungry enough for the single family home inventory that they did not care if the brokerages inflated the prices beyond reasonable values.   Appraisers had to work with inflated value information they obtained regarding home sales generated by these entities. 

Sellers don’t want to wait for buyers.  Brokers are offering to purchase with cash and giving the sellers the option to close at their leisureMany sellers like the idea of not being pressured to move.  If they realized it could be costing them $20,000 to $100,000 in equity to do a quick cash sale, would they have waited a few months to close?   There are probably a large number of sellers with seller’s remorse today. 

This activity has set the stage for future real estate transactions.  Sellers no longer have to wait for a buyer.  There are any number of large real estate firms purchasing from the sellers directly to resell at a profit for themselves.  Some brokerages are backed by investors who are flush with cash.  The brokers can receive multiple commissions in the sale of one property, even if they are not actually buying for themselves.   Sellers must have any number of reasons why they would not wait for a sale and brokers are making considerable profits on the seller’s equity.    

It is now 2024 sellers are still being rescued by brokers and investors paying cash for homes to flip or to rent.   As of this date there has been no accountability for this type of behavior from real estate brokers.  Today, it is the brokerages who buy real estate from the sellers and flip to investors who control the market prices for future buyers.  It is not a buyers market where the buyers determine the prices.  

Many buyers have been totally priced out of the market. 

It is not because interest rates are too high.  Lowering rates will not make much difference when real estate prices are to high the buyers still cannot afford the payments, the additional high price of insurance or real estate taxes combined.

Florida sellers are waiting a little longer for sales.  While smart real estate brokers and investors are refinancing and taking the equity out of the properties they own.  They may then put them on the market for sale.   With an unstable economy, they don’t want to wait until they have to short sale or give up the property to foreclosure because they are underwater.  

GOOD NEWS FOR SELLERS

Many Florida sellers list their properties for sale at the end of the year anticipating the flock of Snowbirds who ALWAYS buy in the winter.  Snowbirds  who sold over the summer will be coming to Florida in the winter with cash.  They will pay higher prices with cash and no appraisals, because they made themselves homeless.  All Florida real estate agents know this to be a fact.  

Cash buyers are King of Florida homes for sale!

Hurricane Ian has made it very difficult or impossible to obtain homeowners insurance in some cases and places in Florida.  Lenders will not write mortgages without homeowners’ insurance.  Affluent cash buyers (especially if they are homeless) are willing to buy and self insure in Florida in the winter of 2024. 

There are cash investors, who did not realized they can’t get seasonal rents 12 months out of the year.  Maybe they were misinformed? Smart investors with negative cash flow, will often refinance a property to take out their equity and then sell.  Especially  when the property is giving them a negative cash flow.   This will  increase in Florida inventory this winter.  There will be even more inventory in the Spring time after the investors seasonal tenants leave for their Northern homes. 

Florida’s Primary homeowner’s are basking in the sunshine with their low interest rates.  Unless, they have a need to sell, they are not going to give up their homes in an unstable economy with home prices so high.

Statistics show a very large number of property showings in Florida for the winter of 2022.  However,  overall numbers of sales were down in most areas of Florida by the Spring of 2023.  Many snowbirds came, looked and left without purchasing in 2023.  They feel the pressure the  economy is putting on their basic lifestyle. Prices of insurance and real estate taxes are very high in Florida for new residents, 2nd home buyers and investors.

Some real estate database systems are showing many rental properties for sale in coastal and resort areas.  

Although prices are still very high in resort areas.  Sellers in recreational areas who purchased 2 or more years ago, for AirBnB rentals, especially in coastal areas, should be much more motivated sellers the winter of 2024.  Many investors and some sellers will have a lot of equity to negotiate.  Many are ready to sell because their taxes and insurance payments are too high for them too! 

Does real estate history repeat itself? 

In 2009-2012 many investors took out their equity by refinancing. Then, if they could not sell the property via a short sale they just let it go into foreclosure.  This ultimately impacts the banks who are lending money and often has them  taking the property in foreclosure.   The US government has rescued some banks already.  They need properties to house the new immigrants coming into the US.  Foreclosed homes with government loans may not come back on the market is they government becomes a landlord.  Anything is possible.

Prices in communities impacted by hurricanes are likely to be  higher, because there will be less inventory.  Investors need to make up for their repair loses.  Affluent  cash buyers and investors do not always carry insurance on their properties. After hurricane Ian many of them owned vacant lots instead of buildings!

Affluent snowbirds will be back in the winter of 2024, it’s a Florida fact!

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As stated by AARP and the Consumer Federation of America in REALTOR® NEWS

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